Welcome to Globus Medical’s Q1 Earnings Call. (Operator instructions.) Joining today’s call from Globus Medical will be David Paul, Chairman and CEO; David Demski, President and COO; and Richard Baron, Senior Vice President of Finance and CFO of Globus Medical. I will now turn the call over to Richard.

Thank you for being with us today. I will now read our required legal disclaimers. During this call certain items may be discussed that are not based entirely on historical facts. These items should be considered forward-looking statements and are subject to many risks, uncertainties, and other factors that are difficult to predict and may affect our business and operations. As a result, our actual results may differ materially and adversely from those expressed or implied by our forward-looking statements. A discussion of some of these risks, uncertainties, and other factors are set forth in our Form 10(k) filed with the Securities and Exchange Commission on March 5, 2013, and in our period reports on file with the SEC. These documents are available at www.sec.gov. We undertake no obligation and do not intend to update any forward-looking statements as a result of new information or future events or circumstances arising after the date on which it was made. The financial information discussed in connection with this call reflects estimates based upon information available at this time and could differ materially from the amounts ultimately reported in our Q1 2013 Form 10(q). Our revenue, earnings, operating margins and similar items are sometimes expressed on a non-GAAP basis and have been adjusted to include certain items including among other things interest expense, depreciation, amortization, taxes, provision for litigation settlements and stock-based compensation. The comparable GAAP financial information and a reconciliation of non-GAAP amounts to GAAP can be found in the tables included in today’s earnings release, which is available on the Globus Medical Investor Relations webpage at www.globusmedical.com. I will now turn the call over to Dave Demski, President and COO.

Thank you, Rick. I will provide commentary on our overall performance for the quarter, Rick will give some additional color on our financials, and David Paul will provide his insight into our product development efforts. We’re pleased to announce record sales of $105 million for Q1 2013. Adjusted EBITDA was $35.5 million. GAAP net income was $19.9 million and fully diluted EPS was $0.21 per share. Sales in Q1 were 11% higher than Q1 2012, well above the industry as a whole and a strong performance given two fewer procedural days in the quarter and an extremely strong Q1 last year. More significantly, our sequential sales growth in Q1 was 4.5% over Q4 2012, which in turn was 6.1% higher than Q3. This consistent, steady financial performance has been a hallmark of our company and leaves us well positioned for a great 2013. Adjusted EBITDA was 33.8% of sales for Q1 2013 compared to 35.9% in Q1 2012, a reduction of 2.1 percentage points. 1.7 percentage points of this delta is attributable to the medical device tax which began on January 1, 2013. In addition, the net impact of Algea Therapies reduced adjusted EBITDA by 0.7%. But for these two items our adjusted EBITDA would have improved by 0.3% over Q1 of last year, which is a result of our continued steadfast focus on managing costs that has allowed us to deliver consistently superior profit margins from an increasing sales base. Recruiting activity in the quarter was exceptionally strong and we have been able to attract several high-quality sales reps from our larger competitors. While we don’t share specific numbers in this area, those of you who are familiar with our story recognize that this is one of the key drivers of long-term growth. We’re very pleased with our ability…

Thank you, Dave. Today I will review our performance for Q1 2013 as compared to Q1 2012 for key elements on the income statement, balance sheet, and statement of cash flow. Our worldwide sales for Q1 2013 were a record-setting $105 million. This was a 10.9% increase over the then record-setting and exceptionally strong Q1 2012. Our growth continues to be driven by sales of our disruptive technology products, which increased this quarter to $43.7 million or by 31.5% from the prior year’s quarter. Sales in the United States for Q1 2013 grew to $96.3 million or by 9.4% while international sales grew to $8.7 million or by 30% from the prior year’s quarter. Overall growth in sales was attributed to expansion of both domestic and international territories and greater penetration in existing territories and countries. Gross profit for Q1 2013 was $81.5 million or 77.6% of sales for the current year’s quarter. This is an improvement of $5.2 million from the $76.3 million gross profit from the prior year’s Q1. The percentage in the current quarter was unfavorably affected by 1.7% or $1.8 million due to the medical device excise tax. Research and development expenses this quarter were $6.8 million or 6.5% of sales as compared to $6.7 million or 7.1% of sales for the same period of 2012. The increase in spending from the prior year quarter was due to the increase in costs for clinical trials, supplies, and outside services. Selling, general, and administrative expenses were $45.4 million or 43.2% compared to $41.2 million or 43.5% of sales for the prior year’s Q1. The percentage of sales is a slight improvement as compared to prior year sales. The increase in SG&A dollar spend was primarily due to the increase in sales and related sales compensation which included…

Thank you, Rick. We’re pleased to report our Q1 performance with industry-leading metrics. Once again, our ability to deliver innovative products, attract top sales force talent, and maintain financial discipline has enabled us to consistently deliver superior growth and profitability. Not only did we produce exceptional financial results, our sales recruiting efforts were strong, we launched two new products during the quarter, and our product development pipeline remains robust with at least five to ten new products planned for launch in 2013 across all segments of our portfolio. As alluded to earlier, our ability to take market share is directly correlated to our ability to deliver innovative products and attract to sales force talent. Dave touched on our strong performance on the recruiting front. I’m going to highlight three product launches over the last 18 months that should provide some insight into how we look at opportunities to innovate in the future. One of the products we launched this quarter, the FORTIFY Integrated Expandable Corpectomy Spacer has provided surgeons with a unique device for trauma and tumor indications that is unmatched in its scope and versatility. We have led in this space from the very beginning with the XPAND Cage in 2005 and have continued to provide market leading technological improvements for these indications. This is a comprehensive solution that allows for various approaches including anterior, anterior/lateral, and lateral with offerings both in titanium and PEEK that can specifically benefit patients who are treated in the leading trauma and oncology centers around the world. Second, the launch of the RISE Endoscopic Spacer System has provided patients and surgeons with a less invasive method of performing TLIF and PLIF surgeries. RISE is designed to minimize node retraction and can be inserted through an 8.5 mm window regardless of height needed for…

(Operator instructions.) Your first question will come from the line of Bill Plovanic. Your line is open. Bill Plovanic – Canaccord Genuity: Great, thanks. Good evening, congratulations on a good quarter gentlemen. The questions I have, I’ll just start out with Rick on guidance. You just came off a very good quarter. If I look at Q2 the street’s hitting at $106 million, it’s up about 1% sequentially. But you were short a couple selling days in Q1 and you’ll pick a couple up in Q2. Any color surrounding that?

We were definitely off a couple days in Q1. We felt that everybody compensated for that appropriately during that period, and at this point we really feel most comfortable reiterating the consensus that is in first call for the year, and that is $432.3 million for revenue and it is $0.81 for EPS. Bill Plovanic – Canaccord Genuity: Okay. I’m going to switch – you did also provide some color on distribution, and I think a lot of the contracts with Synthes DePuy are coming up in the next couple of months. While you’ve had a lot of success so far, do you see a windfall for the industry as a lot of those reps shuffle around or do you think some of that’s already happened?

Bill, this is Dave. I wouldn’t want to predict for the future. There’s been a lot of activity but it’s hard to say when it will end. Bill Plovanic – Canaccord Genuity: Okay. And then just last, regarding the OIG Fraud Alert – I was wondering, in your script you mentioned about the docs and the hospitals and their response. I was wondering if you could provide just any more granularity or color or anecdotal thoughts on what’s happened so far? Have you seen any hospitals transition already and shut off the PODs? Have you seen any physicians come back to you that had left you? And that’s all I have, thanks.

Thanks, Bill, I’ll take that also. Nothing material up till now, but anecdotally a lot of concern on the part of both hospitals – especially hospitals I would say – as well as physicians. So it’s hard to predict what their actual actions are going to be but they’re I think appropriately concerned by the risk that they’re taking by participating. Bill Plovanic – Canaccord Genuity: Thank you.

Your next question comes from the line of Matthew O’Brien. Your line is open. Matthew O’Brien – William Blair & Co.: Good afternoon, thanks for taking the questions. I thought we’d just start with the strength we saw in the disruptive category this quarter. Can you just give us a sense for what’s driving that? Is it more broad-based versus just a couple of products? And then specifically on SECURE-C, just any kind of update on how you’re doing with that product.

From our perspective, given the number of launches over the past couple years it is a broad-based I guess expansion in that area. It’s not really attributable to any one. Just as a reminder, we’re looking at singles and doubles, not anything that is overall a homerun. Dave, do you want to talk a little bit about SECURE-C?

No. It’s performing according to our expectations. I think we’ve been conservative in our predictions about that product, particularly given the fact that we have to do surgeon education, we have to do training and that creates a natural time lag in the adoption of the product. We’ve been favorably pleased with the coverage of the device when people are trained and want to use it. Matthew O’Brien – William Blair & Co.: Okay, and then just as far as one of your competitors provides a revenue per rep number and I’m sure you don’t want to give us that, or maybe you do, but just your sense on expanding the revenue that you’re selling per rep going forward. Do you have any kind of target that you’re aspiring to?

Actually we don’t. We look to move all reps, our most successful reps and our ones that are on full commission, so the target there is really more on the way that we look at costs, the way we look at their compensation. So it’s not a per-rep basis. We have a fairly wide variability among the reps that are on full commission so it’s not a target per se. Matthew O’Brien – William Blair & Co.: Okay, but just a little bit further on that – do you get the sense that there’s significant room to increase the revenue per rep as it stands today?

Absolutely. Matthew O’Brien – William Blair & Co.: Okay. And then finally real quick, internationally very strong growth there. Would you mind letting us know which countries you added in the quarter? And then was there any kind of material stocking to any of those new countries?

We really don’t comment on individual countries. It was three countries. The effect actually of those countries was limited due to timing. We don’t have issues at this point on any stocking-type distributors in the way that I think you’re concerned with. So the sales were normal – plugging along, expanding into new territories, a couple new reps and that type of a thing internationally. It’s the same story there as it is in the US. Matthew O’Brien – William Blair & Co.: Okay, thank you.

Your next question comes from the line of David Roman. Your line is open. David Roman – Goldman Sachs Group: Hi, good evening everyone, thank you for taking the question. I wanted to start on the margin side of the equation. And understanding that the medical device tax negatively impacted gross margins as expected it still looks like on an underlying basis gross margins are down year-over-year. Can you maybe just talk through the dynamics influencing that number?

As you noticed, the major item of course was the device tax. Adding that back in I believe we were at 79.6% and change perhaps versus around 80.0% in the prior year in a gross margin. We don’t see it as anything per se indicative of anything other than quarter-to-quarter that has varied. I don’t believe it’s a long-term trend. A little bit of it is the weight of OUS versus US; a little bit of it is product mix but there’s nothing there that I think signals anything prolonged in the future. We’re totally concentrating on the bottom line as far as operating, GAAP operating margins and adjusted EBITDA. So on a long-term basis, David, I think the only thing that affects us is the device tax. David Roman – Goldman Sachs Group: So along the same lines, R&D looks like it’s as a percentage of revenue one of the lower numbers that that’s been in some time but in absolute dollars still pretty consistent. I assume it just has to do with sales volumes being better, no change in your spending priorities and product development?

No change at all in the priorities. R&D from a dollar perspective has the risk of occasionally bouncing around as to spend for a trial or spend for an investment, that type of a thing. I think you’d still keep within the range that we’ve been within the past year. David Roman – Goldman Sachs Group: Okay, and then the last question would be if I look at the sales line, a very strong number and disruptive technologies up again – it’s a very tough comp. But that does imply I think that the innovative fusion segment was roughly flat year-over-year? How should we think about that going forward? Does this has to do with where you’re concentrating your business on some of the more disruptive technologies and that’s going to lead to a further convergence in [the two] as a percentage of revenue? Anything specific to call out that drove that business to be flat in the quarter?

Overall we’re able to take market share with the disruptive technologies, and to some extent there’s some cannibalization going on within our own portfolio. So we would expect disruptive to grow much faster than the innovative fusion bucket in the future. David Roman – Goldman Sachs Group: Okay, I’ll get back in queue.

Your next question comes from the line of Bob Hopkins. Your line is open. Bob Hopkins – Stifel Nicolaus: Sure, thank you. Hey, good afternoon and congrats on a really good number this quarter especially relative to what we’re seeing coming out of some of the other spine players. So a couple quick questions, and I apologize, I’ve been hopping around on a couple of different calls here, but the pricing dynamic in the quarter – was that different than it has been the last couple?

It’s been about the same, Bob. It’s about low- to mid-single digits. Bob Hopkins – Stifel Nicolaus: Okay. And then when in the course of this year do you expect that the next generation Algea product can come to market?

Well, we launched another product last week called SHIELD which is a contained balloon that can take cement-in. So we launched it last week and we’re eagerly looking forward to seeing the uptake with that product. We continue to work on several other products for the Algea division that will come out later this year and into next year. Bob Hopkins – Stifel Nicolaus: Do you think this product is one that can really get some share momentum going or do we need to wait for some of the other launches?

It’s too hard to predict, Bob. We really are thinking that this product has significant benefits over the existing treatment of care. It’s able to contain cement in a much better way than using just a balloon but we’re waiting to see as reimbursement is pretty challenged in that space right now. There are a lot more competitors than before so we’re waiting to see how it pans out in the marketplace.

And just to remind people on the call, when we talked about that product either in conferences or past calls, the timing that we’d always suggested was sometime late in this half. So it occurred in May versus June, so we’re pretty much on time with that. So its effect was already anticipated in the numbers that we’ve talked about. Bob Hopkins – Stifel Nicolaus: And the drag for the year, Rick, from Algea spend?

Q1 last year we essentially had very little spend, so its disruption in the number last year comparatively was relatively low. We see it mitigating. It was about 0.7% this quarter in the change year-to-year. It’s something that I think on a comp basis in the future we probably won’t talk as much about it. Our purpose in the past was to make sure everybody understood the anomaly. We’ve always said that we would move towards profitability over the course of this year into next year, and we feel as though we’re on track for that. Bob Hopkins – Stifel Nicolaus: Okay, thank you for that. And then sort of a longer-term question on profitability and your EBITDA margin, and obviously you’ve got the medical device tax and some spending going on this year. But as you look out further into the future, I mean do you expect to get kind of incremental leverage on that line as you go forward? Or is kind of the 35%, 36% level about as high as you think you can run the business? Where ultimately do you think you can get?

I think the US metal business has some improvement left in it but of course we’re fighting the pricing issue there. I think we have a significant opportunity for operating leverage OUS as we’re just ramping up there in a number of countries. And then obviously the Algea piece needs to get positive so I think there’s room to move it over time. Bob Hopkins – Stifel Nicolaus: Alright, and then just one last question: Rick, on Q2, Q3, Q4, is that even selling days for each one of those quarters year-over-year?

I believe Q2 has one more selling day than last year and I’d have to check the calendar. I think the rest of the year is even. Ultimately over the course of the whole year of course it’s even except in the case of leap year, which was last year – that was one of the extra days in Q1. But it’s minor from here on in. Bob Hopkins – Stifel Nicolaus: Great, thank you very much.

Your next question comes from the line of Matt Miksic. Your line is open. Matt Miksic – Piper Jaffray & Co.: Hi, good evening. So a couple follow-ups. I think Dave, you had mentioned in your prepared remarks – I appreciate the color on the pricing pressure and the payer pressure. I don’t want to split hairs but did I hear you right in that you said pricing seemed like it may have eased just very slightly?

So it was about the same – kind of low- to mid-single digits. Matt Miksic – Piper Jaffray & Co.: Okay, I just had remembered you consistently saying “mid-single digits” for some time, so I don’t want to sound too hopeful so I appreciate that. And then on the payer pressure I think you mentioned “stable” – can you talk a little bit about what’s changing there if anything? Is it docs have just gotten used to it and it sort of is where it is or any dynamics there I’d appreciate? And then I have a couple of quick follow-ups.

Yeah, I think that the docs understand better how to respond. And again, we’re investing in some resources here to help them through advocacy programs – them and their patients. And I think we just went through a cycle where it had an impact where it reduced procedures. I think now we’re against the comps of that which are lower. So it’s not getting worse. Matt Miksic – Piper Jaffray & Co.: Okay. And then on the margins, Rick, it sounds like you said it was what, about 70 basis points of pressure from Algea in the quarter, or net investment I should say?

That’s a net change from the prior year. Matt Miksic – Piper Jaffray & Co.: Okay. So the impact on the quarter was what about, if you could share that?

It was about 2.3% but in Q1 we also had the effect obviously… The math is there. Matt Miksic – Piper Jaffray & Co.: Say that again, I’m sorry?

In Q1 2012 there was about 1.6%. And as we’ve said before, we’re more focused on the change versus – and we feel as though we’ve progressed now that we can see the light of breakeven and profitability at some point into the future. And remember what we’ve said as far as, and this may also be helpful to Bob’s question earlier: the 34%, 35% range is where we feel we can be sustainable over a period of time. We’ll take that extra leverage that we have over time and we’ll reinvest it into projects like OUS which we did historically and projects like Algea. Matt Miksic – Piper Jaffray & Co.: Great. And I’ll come back to Algea in just one second, but on the international, was that also sort of a net investment in your sort of EBITDA line this quarter? Is that the way we think about it or was it breakeven, or was it positive yet?

It’s positive but clearly lower than average. Matt Miksic – Piper Jaffray & Co.: Got it. So on Algea, I heard your comments about the new products which is great. But could you refresh our memory here as to what you think the key catalysts for success there are? In other words, is it that you’re missing a product that’s going to sort of attract surgeons or is it still kind of more of a contracting, sort of access to accounts kind of issue? I appreciate the color.

Sure, Matt. Primarily it was a contracting issue but also we had some products that we needed to fine tune. So we’ve done that across the board and made some adjustments to the products themselves. We’re not missing anything; I think we line up very favorably with the competition at the very top end and our guys are armed with very good products. And we’re fighting through those contracts, and we’re seeing some success on that front so again we’re hopeful that the second half of the year we’ll start to be able to deliver there.

Matt, one thing to clarify about the question you had earlier on pricing and payer pushback – what we’re trying to say is we’re not seeing dramatic improvements but we are seeing modest improvements in the pricing that we’ve been facing, and that’s why we’re not yet ready to declare that the pricing issues are gone away. We are seeing modest improvements and that’s why we’ve modulated that from mid-single digit to low- to mid-single digit. Matt Miksic – Piper Jaffray & Co.: I totally understand, that’s helpful. And then the last thing again, just on the products front, you called out the RISE, the titanium expandable low-profile interbody. Can you talk a little bit about… I mean we get so used to seeing all these PEEK spacers in the market and all this plastic and this is a titanium spacer essentially, albeit low-profile and expandable. From your experience so far is this a niche type of product? Can this essentially be a broader product? Any thoughts you have on what you’ve seen so far will be helpful.

Okay. The primary reason people were leaning towards PEEK, and we have a lot of PEEK spacers, is the radiographic visualization. When we designed RISE we were able to design it in such a way that in the lateral and the AP image the surgeon can visualize bony fusion much better because of the open windows that the product has. So that is the main reason for going to PEEK. A secondary reason is the modulus of elasticity. That can be modulated by the design. Surgeons like RISE because of its incredible power on the distraction as well as the ability to visualize the placement of it much clearer than a PEEK device with tantalum beads. So we have been frankly quite surprised at the amount of uptake of the device made out of pure titanium, and we are hearing more and more comments – it started first in OUS markets but now more in the US, that surgeons are liking to see the devices made from titanium. Matt Miksic – Piper Jaffray & Co.: And that’s because sort of the bone-friendliness of titanium versus PEEK?

The bone friendliness of titanium and the ability to visualize placement in the disc space. Matt Miksic – Piper Jaffray & Co.: Great, that’s very helpful. Thank you, David.

Thank you, Matt.

Your next question comes from the line of Richard Newitter. Your line is open. Richard Newitter – Leerink Swann & Co.: Hi, thanks for taking the question, guys, and congrats on the solid quarter. Just three quick follow-ups: first, forgive me – I missed the first few minutes of the call, if you said this I can follow up offline. But did you guys call out the selling day impact this quarter on a percentage growth basis?

We didn’t call that out, Rich, but our average for the quarter was about 1.7 per day. So if you assumed the two days would have been at the same average it would have added about 3.5 points to the growth – it would have been about 14.5%. Richard Newitter – Leerink Swann & Co.: Okay, that’s helpful. Just secondly, Rick, you kind of gave us what the top and the bottom lines were for consensus. Can you tell us what your understanding of adjusted EBITDA margin is in the consensus?

Yeah, we’re most comfortable looking at [Bristol] has and at this point the information that we have there is really top and bottom line. We’re kind of in a unique position with our category in that I think that the GAAP EPS is a really good measure of overall profitability for us. So we’re going to stick with those two items and hopefully get into the appropriate pattern in the future. Richard Newitter – Leerink Swann & Co.: Okay. And then maybe just with respect to… I appreciate you don’t want to necessarily give quarterly guidance but can we kind of think of the Q1 EBIT and EBITDA margin kind of as the low point in the year? Is that a fair statement?

Our targets for EPS or for growth have always been in the range that we’ve discussed historically. As I think everybody is aware of now, a little bit by the number of words that were said on the last call, Q1 last year 2012 was just a really tough comp for us, especially on the top line. We feel as though we’ve performed really well against that. We feel as Dave said earlier that there is potential additional leverage as we go forward. We’re not going to be happy with just having things where the device tax leaves us on a net margin basis so we’re going to take some of that leverage that we can get out of increased margins, on OUS and Algea – we’re going to take it and we’ll perform at a slightly higher level over the course of the next few quarters. You’re not going to get it back all in one quarter, though. Richard Newitter – Leerink Swann & Co.: Got it. And then just lastly, can you update us on anything on the legal front, the litigation you have outstanding right now, NuVasive or Synthes? And should we expect any variations in legal expenses with those initiatives and activities?

Yeah, I’ll comment on that, Rich. The most significant upcoming event is that we’re scheduled to go to trial with Synthes in June on the integrated plate spacer patents. Those things can get rescheduled and moved out. We still haven’t had a Markman ruling there so that’ll be a challenging trial without the Markman ruling. So that’s about the only thing of significance. The other litigations are moving along as you might expect. We don’t see a big change in our litigation expenses from our past in the next couple quarters.

And we tend not to call them out. It’s what we consider unfortunately part of the operating expenses. Richard Newitter – Leerink Swann & Co.: Okay, great. Thanks a lot and good quarter, guys.

Thank you.

(Operator instructions.) Your next question comes from the line of Steven Lichtman. Your line is open. Steven Lichtman – Oppenheimer & Company: Thank you, hi guys. I just wanted to ask on SECURE-C, David, I wonder if you can comment on what you’re hearing from surgeons as the training sort of begins here in terms of their overall interest in cervical arthroplasty given reimbursement’s improved. Is it in line with what you expected, is it better than expected? And maybe some updated thoughts on where you think that segment of the market can go over the next three to five years.

I think, let me take that. First, over the next three to five years I think that that can be a really exciting segment in the market. But there are some factors that are still a drag for that, and one of that is physician reimbursement for that procedure. Physicians are still reimbursed more for an ACDF than for an arthroplasty. While reimbursement has improved with many of the private players it’s still not a slam dunk for many of the payers, and quite frankly that’s an extra bother for the patients and for the physicians to battle the payers. And so that’s also being a drag. The clinical outcomes have been great as you’ve noticed in our clinical study. We have overall superiority at the recent [ISAS] meetings in Vancouver. Overall cervical arthroplasty is for sure here to stay and it’s going to have a lot more uptick. In 2014, in Q1 we think that the bundling code for an ACDF procedure is going to have a significant impact when the payment to a facility is going to be the same regardless if they use an ACDF or a cervical arthroplasty device. So there are still some factors left before arthroplasty can really take off in the US. Steven Lichtman – Oppenheimer & Company: Got it, thanks. And then my second question is on Japan – are you guys still on track for potentially starting there in 2014?

At this point we don’t have anything to disclose. We’re still working through and seeing how we’re going to enter Japan. We will be sure to comment on it once we have more clarity on it. Steven Lichtman – Oppenheimer & Company: Okay, fair enough. Thanks guys.

There are no more questions at this time.

Thank you all for joining the call and see you again next quarter.

This concludes today’s conference call. You may now disconnect.